Gulf Air Company

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Gulf Air Company

P.O. Box 138
Manama
Bahrain
Telephone: (971) 2 633 1700
Fax: (971) 2 632 9721
Web site: http://www.gulfairco.com

State-Owned Company
Incorporated: 1950 as Gulf Aviation Company
Employees: 5,000
Sales: BD 340 million ($902 million)(2002)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 488190 Other Support Activities for Air Transportation; 561520 Tour Operators

Gulf Air Company is the national airline of Bahrain, Oman, and the United Arab Emirates (UAE). It operates a fleet of 30 aircraft to 43 cities in 32 countries from Europe to Asia. The company has developed a reputation for outstanding cabin service and takes pride in its history as a pioneer in the Gulf airline industry and as an example of cooperation between governments.

Origins

Gulf Air traces its origins to Gulf Aviation Company, which was established in Bahrain by a young British aviator, Freddy Bosworth. Bos worth had captured the local community’s interest in flying via sightseeing trips and soon set up a commuter service between Bahrain, Doha, and Dhahran with his single airplane.

Bosworth secured backing from a group of local businessmen and registered Gulf Aviation Company on March 24, 1950. Operations started on July 5. British Overseas Airways Corp. (BOAC) acquired a 55.5 percent interest the next year.

Most of the airline’s business was charter work for oil companies. The company started out operating rather small aircraft. Its first plane, the Avro Anson Mark 1, seated seven people. It was replaced in 1951 by the de Havilland Dove, which had room for one more person. The Dove flew for Gulf Air until the 1960s. Gulf Air was also using four-engine de Havilland Herons, which could carry more people and cargo and fly them farther.

The scheduled network grew. Abu Dhabi, Al-Ain, Kuwait, Muscat, and Sharjah were connected in the 1950s. In the 1960s, Bandar Abbas, Bombay, Dubai, Karachi, Salalah, and Shiraz were added, while Fokker F27 turboprops replaced older model aircraft in 1968. This was an especially significant year because it marked the beginning of in-flight service for Gulf Air, an area that would become one of the pillars of the company’s reputation.

Foundation Treaty of 1974

In 1973, BOAC’s controlling shareholding was bought by four Arab governments: Bahrain, Qatar, the Sultanate of Oman, and Abu Dhabi (on behalf of the United Arab Emirates). The airline was named the official flag carrier of each of the four countries in the Foundation Treaty of January 1, 1974. Gulf Air linked these member states with other Middle Eastern countries. It also built hotels in each of the four to accommodate business travelers.

Gulf Air used VC-10 airliners made by British Aircraft Corp. to launch service to London in April 1970. (The BAC 1–11 had been the airline’s first jet.) The acquisition of the VC-10s was accompanied by a technical assistance and training agreement with British Airways. BA was also something of a competitor and launched a London-Bahrain service via Concorde two years later. As successor to BOAC, British Airways inherited a strong presence throughout the Gulf.

The narrowbody VC-10 aircraft were intended only as an interim means to start intercontinental service. In 1976, Gulf Air began receiving deliveries of its replacement, the widebody Lockheed L-1011 TriStars, as well as mid-sized Boeing 737 airliners. The VC-10s were shifted to less established international routes. (Service between the four partner countries was considered domestic.)

The growth of international business led to a four-fold increase in the number of employees. Gulf Air had 800 employees in mid-1974, reported Aviation Week & Space Technology, and about 3,300 at the start of 1976. The L-1011 operation was initially based on crews hired from the defunct British charter carrier Court Line Aviation, Ltd., but Gulf Air was working towards having a 100 percent Arab staff.

Gulf Air posted a record profit of $51.8 million in 1983 when it carried 2.6 million passengers. (The year was marred by the loss of an airliner to a bomb.) By 1986, unfortunately, Gulf Air was posting its first loss of the decade ($5.5 million) as the region’s oil revenues declined while the international market remained competitive. Emirates Airlines, a new carrier in the UAE, would make it more so, though its activities were coordinated with that of Gulf Air and Kuwait Airways by the Gulf Cooperation Council.

Maintenance Unit Opened in 1987

Gulf Air continued to become more independent. It opened its Gulf Aircraft Maintenance Company (GAMCO) unit in Abu Dhabi in 1987. It owned interests in hotels; Bahrain Airport Services; Gulf Helicopters; and GCC Aviation Services, a caterer.

Boeing 767 airliners were added to the fleet in 1988, improving the company’s on-time performance. Airbus A320s were added in 1992 to phase out the fleet of ten Boeing 737s. Two years later saw the arrival of Airbus A340s.

Smiling in the Early 1990s

Gulf Air retrenched during the downturn in business precipitated by the Iraqi invasion of Kuwait, laying off 350 employees in 1990 en route to a loss of $95 million. However, by the end of 1991 a recovery was already in evidence, and the airline rapidly rolled out expansion plans. New routes (Singapore, Sydney, Thiruvananthapuram) and new planes were added. Gulf Air achieved net profits of $48 million in 1991 and 1992; it was one of the few airlines to make money in the early 1990s.

In 1993, Gulf Air unveiled a $10 million ad campaign pitching the carrier as “The International Smile of the Gulf.” Routes extended as far as Australia, Hong Kong, and Johannesburg, and the company was carrying nearly four million passengers a year. By the end of 1993, Gulf Air was planning an initial public offering to offset the cost of a $2.2 billion expansion, which made the airline the largest in the Middle East, flying about 40 aircraft to 50 destinations. Tentative plans for a stock offering dated back to 1984. At the time, Gulf Air had 5,000 employees, more than half of them Gulf nationals. The airline opened an aviation college in Doha that year, led by former CEO Ali Ibrahim Al-Malki.

Significant passenger perks were introduced in 1994, including an in-flight entertainment system on long-haul planes and the new FALCON Frequent Flyer Program.

After making money for four years, Gulf Air posted a $159 million loss in 1995. Contributing factors were a downturn in the regional economy and very high levels of competition, according its new president and CEO, Sheikh Ahmed bin Saif al-Nahyan.

By 1997, Gulf Air was more than $1 billion in debt, leading to more route cutbacks (including services to New York, Geneva, and Johannesburg) and the sale of 17 aircraft worth $850 million. This left a fleet of 28, six of them leased.

The staff had become almost entirely made up of Arabs by the mid-1990s; most of the 3,000 employees were from Bahrain. However, during the late-1990s crisis, a couple of former British Airways executives were brought in.

Shareholder states Qatar and Oman were developing their own airlines, Qatar Airways and Oman Aviation, complicating decisions on how to re-capitalize Gulf Air as well as diluting its business. In addition, Emirates Airlines had been operating out of Abu Dhabi for more than a decade, though that government was aiming to infuse more capital into Gulf Air in exchange for a higher ownership stake. After considerable losses in 1995 ($159 million) and 1996, Gulf Air was again able to post an operating profit ($48 million) in 1997.

50th Anniversary in 2000

New uniforms in gray, blue, and peach were introduced in Gulf Air’s 50th anniversary year. As part of the celebration, Gulf Air hired two vintage aircraft—an Avro Anson and a de Havilland Dove—to recreate the company’s first flights. Sadly, in August 2000 Gulf Air also experienced its second fatal crash ever and the loss of an Airbus A320.

Passenger numbers were falling worldwide, exacerbating Gulf Air’s struggle with a heavy debt load. Gulf Air posted a $98.1 million loss for 2000 and a $132.3 million one for 2001. The partners invested $159.2 million in a restructuring package in May 2001. A year later, Qatar announced it was withdrawing its 25 percent stake, preferring to focus its resources on Qatar Airways. The remaining partners provided another $81 million capital injection.

For the first time, the airline hired an airline professional as CEO: James Hogan, who formerly held top jobs at Ansett Airlines and British Midland International. While cutting costs, Hogan also sought to develop the partnership with tourism sections of the three shareholding partners.

Company Perspectives:

One of the things Gulf Air takes most pride in is its history. We have come a long way in 50 years—from small-scale commuter service to major international airline—the national carrier of Bahrain, Abu Dhabi (UAE), and Oman. However, be it five or 50 destinations, seven-seater planes or state-of-the-art passenger jets, two things have remained constant—a commitment to the latest aviation technology and an adherence to traditional hospitality.

In November 2002, Gulf Air rolled out a new first class service. On flights to London, Paris, and Frankfurt, this featured chefs from elite European restaurants preparing food to order—the “Restaurant in the Sky” concept. A holiday package focusing on Oman, Abu Dhabi, and Bahrain was introduced at the same time with the aim of attracting tourists to the region despite the impending war with Iraq.

The next month, the three remaining partners injected 90 million dinars ($238 million) in a demonstration of their commitment to Gulf Air, which lost BD52 million in 2001. Early signs of a turnaround were in evidence; the 2002 loss of just under BD41 million ($110 million) was about BD8 million less than had been predicted.

A New Course in 2003

A new three-year recovery plan officially began on January 1,2003. The company was planning to expand its route network and increase its fleet. In May, Gulf Air launched its Gulf Traveller subsidiary, “the region’s first full service all-economy airline.” Gulf Traveller, which was started with six of Gulf Air’s Boeing 767s, flew short and medium haul routes around the Gulf and to the Indian subcontinent. These were already served by Gulf Air’s main line; the new operation offered additional frequency of flights for leisure travelers and expatriate employees. Business travelers were to be wooed by replacing once or twice daily service on full size airliners with more frequent smaller regional jet flights.

New livery featuring a restyled falcon was unfurled in April 2003, underscoring Gulf Air’s commitment to improvement. The company perched an 11-meter tall neon golden falcon atop the Falcon Tower in Manama, Bahrain. Gulf Air’s six-year-old Web site was revamped in the same month.

The airline was also planning to establish a reservations center in Muscat that would employ 300 Omani nationals. Gulf Air aimed to reduce its losses to BD20 million in 2003 and to break even by 2004. To bring in traffic from the rest of the world, Gulf Air was planning to join a global airline alliance. It was also discussing potential areas of cooperation with KLM Royal Dutch Airlines and Oman Air.

Principal Subsidiaries

Alzouman Aviation; Gulf Air; Gulf Air Cargo; Gulf Air Holidays; Gulf Traveller.

Principal Competitors

Emirates Airlines; Oman Aviation; Qatar Airways.

Key Dates:

1950:: Gulf Aviation Company is created.
1951:: BOAC acquires a majority control in the company.
1968:: Cabin service is introduced.
1970:: Service to London is launched with a VC-10.
1973:: Bahrain, Qatar, Oman, and UAE acquire control of the airline.
1974:: Gulf Air becomes the official airline of four shareholding states.
1987:: GAMCO maintenance unit is opened.
1993:: Major expansion takes places and a fleet renewal program is launched.
2000:: Gulf Air’s 50th anniversary is celebrated with flights of vintage aircraft.
2003:: A recovery plan is launched.